Wednesday, August 24, 2016

A few months ago we blogged on a lawsuit against TransAmerica Life regarding the cost of insurance (COI) in their Universal Life products. At the time, we noted that this was most likely an uphill battle, seeing as how every single UL contract specifically says that they can charge the maximum COI as stated in the policy.

Now, perhaps inspired by the TA litigation, policyholders of other carriers are also suing their insurers, citing much the same legal reasoning. Obviously, I'm sympathetic to their plight, but I'm also in favor of the rule of law, and contractual law in this case specifically.

That is, carriers are constrained from using poor investment results as justification for increasing internal insurance costs. And I tend to agree with this: certainly, carriers should look to their portfolio's performance when deciding how much interest to credit, but this has nothing to do with mortality costs (that is, how many of their insureds died the previous year). It seems to me that if interest rates were driving mortality rates, we've got much bigger problems going on here.

A few months ago we blogged on a lawsuit against TransAmerica Life regarding the cost of insurance (COI) in their Universal Life products. At the time, we noted that this was most likely an uphill battle, seeing as how every single UL contract specifically says that they can charge the maximum COI as stated in the policy.

Now, perhaps inspired by the TA litigation, policyholders of other carriers are also suing their insurers, citing much the same legal reasoning. Obviously, I'm sympathetic to their plight, but I'm also in favor of the rule of law, and contractual law in this case specifically.

That is, carriers are constrained from using poor investment results as justification for increasing internal insurance costs. And I tend to agree with this: certainly, carriers should look to their portfolio's performance when deciding how much interest to credit, but this has nothing to do with mortality costs (that is, how many of their insureds died the previous year). It seems to me that if interest rates were driving mortality rates, we've got much bigger problems going on here.